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Jodi Beggs

So What Is Abenomics, Anyway?

By June 3, 2013

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If you've been watching or reading the news in the last couple of weeks, you've probably noticed the proliferation of the term "Abenomics" and much discussion about wither it will work. So what is Abenomics, anyway?

The term is a reference to Japan's Prime Minister, Shinzo Abe, and it's clearly the same play on words that got us Reaganomics, Freakonomics, and so on. (Sidenote: if you want an -onomics named after you, just run a country or sell a few million books!) Abenomics has actually been around for a while, since Abe was reelected in December 2012 and introduced most of his policies at that time. Abe's goal is to reinvigorate the Japanese economy and bring it out of the general stagnation that it has been experiencing over the last couple of decades. (In fact, China surpassed Japan in 2010 to become the world's second-largest economy.) The specific plans include a mix of inflation, government spending, and growth initiatives, and the specific points are as follows:

  • Targeting inflation at 2% per year.
  • correcting or at least mitigating the appreciation of the yen that has made it hard for Japan to exports to other countries,
  • Lowering interest rates to bring them (at least in real terms) into negative territory,
  • Quantitative easing,
  • Public investment in infrastructure projects.

Prominent economists such as Joe Stiglitz approve of Abe's plan, and we're starting to see the effects it is having on the Japanese economy. So far, the plan seems to be working, at least by some measures, but others say it is faltering for a number of reasons or that it is overshooting on the currency front. Regardless, it provides an important case study for the rest of the world.

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